Real estate: Significant change in approach to real estate needed

Significant change in approach to real estate investment and development needed in 2009

With business confidence in Ireland at an all time low – according to PwC’s 2009 CEO Pulse survey – real estate investment and development prospects will be a real challenge in 2009 as many investors fight to survive. PwC and the Urban Land Institute host a Breakfast Briefing to discuss and debate the emerging trends in real estate as well as focus on the challenges and opportunities for Ireland and the UK markets.

Addressing the Breakfast Briefing is Brian Kilkelly, Vice President Global Development, The Urban Land Institute, London said:

“This year, more than any other, our survey Emerging Trends in Real Estate Europe 2009 is a barometer of an industry facing unprecedented challenges. Considering the low volume of trade on which traditional forecasts are based, the Emerging Trends measure of sentiment from leaders across the industry provides valuable indicators to what may lie ahead. For many the current focus is survival with an eye to potential opportunities around the corner. There is no doubt of the urgent need to prepare for significant change to our approach of urban investment and development in 2009. One such shift is the importance of public-private partnerships that build long term value and trust. Greater collaboration will be key to developing innovative approaches that recognise the new public sector driven financial environment that is emerging.”

Also speaking at the breakfast, Tim O’Rahilly, Tax Partner, PwC Real Estate Practice, Dublin, said:

“There remains a real challenge for investment and development prospects in 2009. We are facing a vastly changed business and tax landscape where historic structuring may not produce the optimum solutions. With falling asset values, this is a time for taking stock and reassessing the impact of changes and possible future changes in the tax system and updating strategic planning accordingly. Despite the current uncertainties, there are planning opportunities for property owners. For example, can losses be crystalised? Can cash be released from assets? Can assets be passed to children tax-efficiently?

If buying and investing in property in the radically changed landscape, there is a host of new considerations and planning opportunities to be taken into account in order to ensure the deal is efficiently structured. As distressed property or property related debt comes on the market and vendor price expectations fall, acquisition opportunities will present themselves. Historic structuring may not suit and any future investment should not be undertaken without careful advance planning to ensure the proper tax, legal and business structures are in place and that take account of the changed environment.”

John Forbes, Real Estate Leader, Europe, Middle East and Africa, PwC concluded:

“This is going to be a tough year for many investors. For those who bought at the top of the market it could be a struggle for survival, particularly if banks become more aggressive in dealing with covenant breaches. On the other hand for those with equity to invest, there will be opportunities as the banks start to take action. Although new debt will remain in very short supply, banks may have little alternative to remaining as lenders during the restructuring of defaulting borrowers.”

ENDS

Notes to the editor

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